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Leerink Partners reiterated an Outperform rating on WellCare Health Plans (NYSE: WCG), and raised the price target to $135.00 (from $115.00), following the company's 3Q earnings report. Adjusted EPS of $1.63 handily beat consensus of $1.11. Revenue of $3.58B modestly beat consensus of $3.52B. The beat was driven primarily by meaningful outperformance in Medicare Advantage and Medicare Part D MLRs offset by a miss in the Medicaid MLR.

Analyst Ana Gupte commented, "We maintain our OP rating on WCG as the mid-singledigit exposure to Obamacare should be offset by a more benign MA rate environment under the new CMS and possible HIPF repeal, while take-out remains possible by either AET (OP) or CI (OP), if mega deals break. WCG posted a strong "Beat & Raise" 3Q with a 52c EPS beat, and a 40c raise yet again is a testimonial to the strength of the turnaround being achieved by this management team. It also begs the question on how long the run can continue. The beat was driven by continued margin outperformance in Medicare Advantage and Part D, and with tax rate favorability and SG&A. We see further upside to 2017 beyond the 2016 EPS raise of 40c from margin expansion in a) Medicare Advantage, b) possible margin improvement and top-line growth in Medicaid, and capital deployment with $880MM in parent cash toward additional accretive acquisitions of which AZ Care First closes in 1Q17. Our revised 2017E EPS is $6.50 (increases from $6) and 2018E EPS is $7.30 (increases from $6.85). The management team has been doing a terrific job and after successful margin turnaround is now turning its attention to Quality STAR ratings funded by the 2017 ACA tax holiday. Guidance is expected in Dec. While possible "Repeal and Replace" Obamacare poses mid-single-digit EPS downside for WCG from KY Medicaid expansion, we expect such downside will largely be offset by a more benign MA environment and possible repeal of HIPF. Take-out in our view by AET (OP) or CI (OP) is likely should the legal defense against the DOJ on the mega deals be unsuccessful, we reiterate our OP rating. We raise our PT to $135, which represents a P/E of ~18.5x on our 2018E EPS."

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